INSIGHT-How Congo faced down some of the world's biggest mining firms

Date Mar 16 2018 14:53:04 Source:SHMET

DAKAR, March 15 (Reuters) - In an ornate room in Democratic Republic of Congo's presidential palace last week, some of global mining's most powerful men faced off against government officials over proposed changes to the country's mining code.

    Facing the officials, including President Joseph Kabila, the executives at times threatened to pursue arbitration or close mines if the government went ahead with changes including royalty increases, according to one of the president's top advisers, Barnabe Kikaya bin Karubi, who attended the meeting.

    But there was no mistaking the sense of defeat as executives from Glencore  GLEN.L , Randgold  RRS.L , Ivanhoe  IVN.TO  and other firms descended the red carpeted stairs after six hours to accept before the media a mining code that hikes taxes and removes exemptions for cobalt and other minerals.

    It was an extraordinary climb down for companies that had campaigned tooth-and-nail for six years for better terms, and the president signed the bill into law two days later.

    Congolese officials close to the process say that, in being so publicly combative, the miners overplayed their hand, and in so doing hardened the government's resolve.

    "We realised the bad faith on their part," said Patrick Kakwata, president of the National Assembly's Natural Resources Commission, which oversees mining legislation.

    "They only wanted to look after their own interests and not also the interests of the Congolese people."

    The changes to the mining code in Congo, which supplies some 60 percent of the world's cobalt, could have repercussions for consumers around the world if mining companies pass on costs.

    Cobalt is a key ingredient in lithium-ion batteries that power smartphones and electric cars. Rising demand for those products has caused cobalt prices to more than triple in the last two years.

    The Congolese government's success in facing down the companies' lobbying could also signal a shift in the balance of power as countries sitting on increasingly lucrative resources become emboldened.

    Congo's effort could serve as a model for other countries looking to boost mining sector revenue, particularly those that can leverage demand for prized metals like cobalt.



    Meeting participants Glencore, Randgold, Zijin  601899.SS , China Molybdenum  603993.SS  and Ivanhoe declined to comment for this story. The other participant, MMG, did not immediately respond to a request for comment.

    Early last month, Randgold publicly threatened to challenge the new code through international arbitration if Kabila did not return it to the mines ministry for further consultation with industry.

    And, in December, several of Congo's largest mining companies said in a statement that an earlier version of the code passed by the lower house of parliament would "cause the certain death of a young industry" 

    On Thursday, the mining companies said in a statement they had dispatched a team of legal and technical specialists to Kinshasa for talks with the Congolese government about drafting measures to implement the code.

    The companies said they hoped those discussions would include negotiations over royalties and taxes as well as recognition of the previous code's stability clause.

    Mines Minister Martin Kabwelulu, however, said after last week's meeting that nothing agreed to in the follow-up negotiations could contradict the terms of the new code.

    The new mining code strips away a stability clause protecting existing investments from changes to the fiscal and customs regime for 10 years, opens the door for cobalt royalties to increase five-fold and introduces a 50 percent windfall profits tax.

    The new code applies to all minerals, including copper, of which Congo is Africa's top producer.

    Companies could still challenge it through international arbitration. It is also unclear how rigorously the code will be enforced in a country where informal arrangements often supersede legal provisions.

    In a joint statement issued by the Congo government and the mining executives directly after the meeting, the miners said they had received assurances from Kabila "that their concerns will be taken into account through a constructive dialogue with the government after the promulgation of the new mining law".



    Private investors have poured money into Congo since Kabila signed the 2002 mining code at the tail end of a 1998-2003 war. But locals have seen few benefits. Congo remains one of the world's least developed countries, plagued by corruption and poor governance.

    In March 2015, the government submitted a bill to parliament that proposed raising royalties to levels higher than in the 2002 code but still lower than in most rival mining countries.

    Mining companies resisted, saying that proposed changes to the code would "put the future of the country's mining industry at grave risk" and urged the government to retain the 2002 code.

    Following a steep drop in commodities prices, Congo's government buckled to industry pressure and announced in March 2016 it was suspending consideration of the new code.

    But as the commodity slump bit into the national economy last year - stretching foreign reserves to breaking point and pushing inflation to 47 percent - the government needed cash.

    Parliament toughened up the code at the start of this year.

    Protections under the previous code's stability clause were axed entirely. A 10 percent royalty was introduced on "strategic substances", which the prime minister's office said this week would include cobalt and possibly copper.

    Companies were also mandated to repatriate 60 percent of export revenues to Congo, up from 40 percent in earlier drafts.

    Lawmakers involved in the negotiations did not provide clear explanations for how these last-minute changes came about, but two of them said that they had grown inured to doomsday warnings from miners about the code killing investment.

    "There is this contradiction that emerges each time ... when the miners declare losses (in Congo) when their mother company is only enjoying success," said Alain Lubamba, an MP closely involved in the revision process.

    "This means that we're being suckered."

    Mining companies in Congo typically say that the high risk and cost of investing in the vast country with poor infrastructure hit profitability, justifying demands for favourable terms.



    Randgold, based in Jersey in the English Channel, formed a new lobbying platform with Glencore and others and requested an audience with Kabila.

    The president accepted a meeting with top executives from six mining companies, but insisted they come to Kinshasa in person; no stand-ins would be admitted.

    After a last-minute postponement by a day, the meeting finally began at around 2:30 p.m. last Wednesday with Kabila presiding.

    Randgold CEO Mark Bristow, the miners' designated spokesperson, started by laying out their main concerns and imploring Kabila to re-open negotiations. The other executives chimed in from time-to-time, according to Kikaya, the Kabila adviser.

    "For three hours, they were very confrontational and they were talking in terms of closing down the mines," Kikaya said. Bristow couldn’t be reached for comment.

    Kabila interjected occasionally, Kikaya said, urging the miners not to pursue arbitration.

    "The president explained that this would be bad for everyone. He said, 'Look you are a businessman. If you make a mistake, you lose money. I am a politician'," Kikaya said.

    A breakthrough appeared to come after Kabwelulu, the mines minister, promised the miners that their concerns would be addressed on a case-by-case basis in regulations to be hammered out after the code was signed, according to Kikaya.

    Kabila then exited the room, leaving his advisers and the executives to figure out how to break the news.




Edited by SHMET

Shanghai steel rises on strong demand outlook, hoists iron ore

Date Mar 15 2018 14:20:55 Source:Reuters

MANILA, March 15 (Reuters) - Chinese steel futures climbed nearly 1 percent on Thursday, supported by expectations that demand in the world's top consumer will strengthen with the country's construction industry gearing up for business as spring arrives.

    The firmer steel market helped prices of raw material iron ore gain for a second session in a row, pushing them away from a nearly four-month low reached earlier this week.

    The most-actively traded rebar for May delivery on the Shanghai Futures Exchange was up 0.8 percent at 3,737 yuan ($592) a tonne by 0230 GMT. The construction steel product touched 3,657 yuan on Wednesday, its lowest since Nov. 20.

    Government data showed on Wednesday that China's crude steel output rose 5.9 percent in January and February in a sign that mills ramped up production to take advantage of firm prices.

    The data implies that apparent steel consumption increased 12.2 percent in the first two months of the year, compared with 4.8 percent growth in December, Morgan Stanley analysts said in a note.

    That reflected China's closure of producers of low-quality steel last year and a "healthy order book in early 2018", they said.

    Chinese steel output is expected to rise further from tomorrow when winter curbs on producers in northern cities are lifted as the winter heating season ends. Some cities, including top-producing Tangshan, plan to extend the output restrictions.

    "After mid-March, construction activity will increase and we should see more consumption of rebar," said one Shanghai-based trader.

    Iron ore on the Dalian Commodity Exchange rose 0.5 percent to 487.50 yuan a tonne, above Monday's 475.50 yuan, its weakest since Nov. 20, and adding to Wednesday's 2.1-percent jump.

    Firmer futures have spurred a similar recovery in spot prices. Iron ore for delivery to China's Qingdao port rose 2.7 percent to $71.64 per tonne on Wednesday, according to Metal Bulletin. The spot benchmark had dropped below $70 this week for the first

time since December.   

($1 = 6.3106 Chinese yuan)

Edited by SHMET

New Tata Steel UK pension scheme to be set up after meeting minimum criteria

Date Mar 15 2018 14:13:34 Source:Reuters

   LONDON, March 14 (Reuters) - A new pension fund backed by Tata Steel UK  TISC.NS , a unit of India's Tata Steel, will be set up after meeting minimum size and funding criteria, paving the way for the firm's merger with Germany's Thyssenkrupp.

    The trustee of the British Steel Pension Scheme (BSPS), a 124,000 member final salary scheme from previous owner British Steel, said in a statement the new BSPS would go ahead on March 28 as planned.

    "This is very good news for the 83,000 members who wanted to receive their benefits from the New Scheme and chose to switch to it," said Alan Johnston, who will now act as chairman to the trustee of the New BSPS.

    Britain's pensions regulator agreed a deal last year to allow Tata Steel UK to cut scheme benefits and set up a new BSPS in return for a 550 million pound one-off payment to the scheme.

    Tata Steel UK remains the formal backer of the New BSPS.

    Earlier this year, UK lawmakers said Britain's markets watchdog was too slow to prevent "vulture" financial advisers from ripping off steelworkers faced with critical decisions over their 14 billion pound ($19.6 billion) pension scheme.

    Some 25,000 scheme members failed to opt to transfer into the new scheme, meaning they end up in a lifeboat known as the Pension Protection Fund (PPF) by default, potentially a worse outcome for them.

    Alternatively, some of the 25,000 might have opted to transfer their pension into other investments, but many who took that option were encouraged by dubious financial advisers to sign up to risky, unsuitable investments.

    After Tata's pension hurdle was overcome last year, Thyssenkrupp and Tata agreed to merge their European steel operations to create the continent's No.2 steelmaker. The deal is expected to be finalised late this year. 

($1 = 0.7163 pounds)

Edited by SHMET

LME aluminium teeters near 3-mth low as China smelters ramp up

Date Mar 15 2018 14:10:50 Source:Reuters

MELBOURNE, March 15 (Reuters) - London aluminium hovered near its lowest since late December on Thursday on expectations of rising supply as China's winter pollution controls expire.



    *ALUMINIUM: London Metal Exchange aluminium  CMAL3  crept up 0.2 percent to $2,094 a tonne, having slipped to the weakest since Dec. 19 at $2,087 on Wednesday. Support is seen at the 200 moving day average at $2,083, a break of which could trigger a steeper correction, as it would send a sell signal to momentum following funds.

    *SHFE: Shanghai aluminium  SAFcv1  hit its lowest in 14 months at 13,820 yuan ($2,191) on Tuesday and last traded at 13,950 yuan.

    * SMOG: The winter heating season ended on Thursday. Aluminium smelters in 28 northern Chinese cities had been told to reduce output by at least 30 percent from Nov. 15 to March 15, although the actual volume cut was below expectations, putting pressure on prices. 

    *OUTPUT: China's aluminium production fell 1.8 percent in January-February from a year earlier, data showed on Wednesday, as the country's pollution crackdown and supply-side reform kicked in. An estimated 4.4 million tonnes of new capacity are expected to be completed this year.

    *STOCKS: Shfe aluminium  AL-STX-SGH  stockpiles held at exchange warehouses are within a whisker of record highs near 850,000 tonnes, reflecting a surplus of domestic material.

    *DISCOUNT: The discount between cash Shfe and physical prices  AL-A00-CCNMM  has narrowed to 35 yuan from 385 three weeks ago, reflecting a tightening market and an expected pick-up in nearby demand.

    * COPPER: LME copper traded up 0.3 percent at $7,006 a tonne by 0157 GMT, adding to 0.6 percent gains from the previous session. Prices are expected to rise over the coming month as industrial production in the seasonally strongest second quarter ramps up.

    *TRADE: The Trump administration is pressing China to cut its trade surplus with the United States by $100 billion, a White House spokeswoman said on Wednesday.

    *COBALT: Glencore, the world's biggest producer of cobalt, has agreed to sell around a third of its cobalt production over the next three years to Chinese battery recycler GEM.

    *SMOG: Eastern China's Jiangsu province will step up its war on pollution and focus on "high-quality development" following a spike in smog early this year. 

    *DOLLAR: Supporting metals, the dollar fell against the yen on Thursday as lingering worries about global trade tensions weighed on investors' risk appetite.

Edited by SHMET

Chile's Escondida invites union to early labor talks

Date Mar 15 2018 14:03:26 Source:Reuters

   LIMA, March 14 (Reuters) - BHP's  BHP.AX  Escondida copper mine in Chile, the world's largest, said on Wednesday that it has invited its powerful workers' union to start early talks on a new collective labor contract.

    Last year, a more than month-long strike at Escondida ended with workers opting to extend their previous contract through July 31 of this year instead of replacing it.

    New negotiations are scheduled for June, but BHP said it hoped to begin earlier.

    "This invitation seeks to open a space of dialogue and respect in which the current challenges of the company and the legitimate interest of its workers can be address together," the company said in a statement without proposing a date.

    The union summoned its members to an assembly to decide whether to accept the invitation, according the union's website.

    In February, the union ruled out early talks amid a dispute with the company over the formation of a competing union at the mine.

    Last year's strike jolted the global copper market and cost BHB an estimated $1 billion. 

Edited by SHMET